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How safe is your money? /Blanchard and company July
What the IndyMac bank failure means
It has always been assumed that if your money was in the
bank, it was safe. Right now, that is not necessarily the
case. Panic has ensued and there are not many "safe assets"
where your money can be.
As loan defaults mount and home prices continue to fall,
US regulators are preparing for other banks in America to
fail. This has led Wall Street analyst to ask themselves:
How many will fail and who will be next?
Over the weekend, one of these questions was answered. IndyMac
Bancorp Inc., a bank who specialized in risky mortgages, became
the latest casualty of the subprime mortgage crisis, as federal
regulators shut down the troubled savings bank in the largest
U.S. bank failure since 1984. The bank had total assets of
around $32 billion at the end of the 1st quarter.
Regulators said the immediate cause of IndyMac's failure
was a deposit run in recent days that began after a June 26
letter to the FDIC from New York Senator Charles Schumer was
made public. By July 10, depositors had pulled more than $1.3
billion from their accounts.
Most of the bank's clients, around 265,000, have deposits
that are insured by the FDIC. However, there were over 10,000
clients who had roughly $1 billion dollars in deposits that
will not be insured. These clients have deposits that exceeded
the $100,000 maximum that is covered by the FDIC.
These clients will have to stand in line with all of the
other creditors that the bank owes money to or they can take
what the FDIC will offer them, which will be 50 cents on the
dollar. Essentially, these clients lost half of their money
literally over night.
It is time to check where your money is and consider diversifying
your assets now.
Precious metals and rare coins are assets that have proven
to help investors preserve and build their wealth. While others
wait in line to check on their overall wealth, you can rest
assure that these assets from Blanchard and Company, Inc.
will help your overall portfolio.
In today's uncertain market, people are motivated by fear.
Making a run on a bank could happen at any bank in the country,
all there has to be is a rumor that the bank is failing and
people will line up to take money out. Once the panic ensues,
there is no stopping it, just ask Indymac.